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Higher Education is a Market (Except When it Isn't)

Wednesday, July 05, 2017

This morning the Institute for Fiscal Studies launched a report looking at the impact of higher university tuition fees. The headline was that students will graduate with more than £50 000 debt, but the Director of the IFS, Paul Johnson, also tweeted out the following 'highlight':

Greatly increased subsidies to cheap degree courses which have lower economic returns, but not to e.g. engineering which is more expensive pic.twitter.com/R2THsGpElj

Note that when Johnson say 'increased subsidies' he doesn't necessarily mean subsidies from government in a direct sense, since costs for many degrees are covered solely by tuition fees, which may be paid by the government in the first instance but then in an ideal world are repaid with interest.

There's something perverse going on here. This is a market think-tank concerned about the fact that one group of disciplines in higher education - which remember we're continually told is a marketplace with student-consumers shopping for degrees - has found a way to deliver one product (arts and humanities) at low cost and high profit margins, to consumers who want to buy them. And government has contrived a system whereby the profits from these cheap-to-deliver subjects can be creamed off by institutions to subsidize the more expensive and allegedly beneficial STEM ones. Cheers, arts undergrads.

Some churlish folk might complain that this canny system depends on duping the student-consumer. Since arts graduates are likely to earn less than their counterparts in vocational subjects, they get a double whammy: they spend money that pays for their science counterparts, while they receive a less high return as they enter typically less well paid jobs (to be fair to the IFS they have a valid complaint that the taxpayer will therefore end up 'subsidising' them when they write off their loans later down the line).

But hey, from an institutional point of view this too is a positive thing, since (to use a ball park example without the figures to hand; feel free to supply) if arts and humanities students cost half as much to educate but are not half as badly paid once employed, there's an argument that the return on investment - again from the university perspective - from educating that particular student is reasonable. A cheap-to-educate student at least gets some employability bonus, even if not as much as the very-expensive-to-educate student.

And of course we as a society also need doctors and engineers. If universities can educate arts and humanities undergraduates, to support the expensive medical, engineering etc. degrees, all the better.

Of course, none of these arguments really seem quite to satisfy, do they? They are attempts to justify the structurally unjustifiable. Which is precisely my point. When a free market think tank complains that the system is broken because it's working too much like a market for the institutional supermarkets it is almost as if - call me crazy - Higher Education should not be treated as a market at all in the first place.